TUI, the tourism and shipping group which owns the Thomson holiday business in the UK, has launched a £1.1bn bid for rival CP Ships in a further step towards the consolidation of the global container shipping industry.

If TUI's recommended bid succeeds, the combination of its Hapag-Lloyd subsidiary with CP Ships will create the world's fifth-largest container shipping company.

The move comes only weeks after the completion of AP Moeller-Maersk's acquisition of P&amp;amp;O Nedlloyd to create a group accounting for 17% of the global container shipping market.

"The combination of Hapag-Lloyd and CP Ships will create a company with the strength and scale to compete effectively in an industry where consolidation is changing the landscape," said Hapag-Lloyd chief executive Michael Behrendt.

Neither Hapag-LLoyd nor CP Ships ranks in the global top 10, but the combined grouping will have a fleet of 139 ships operating on 100 routes across the globe, with sales of £4bn and earnings of just over £400m.

Hapag-Lloyd said that the deal would strengthen its coverage in the far east, Australasia and South America. The scale of the new grouping would "increase its attractiveness to partners in alliances".

CP Ships employs almost 5,000 people worldwide, including about 500 in the UK at its headquarters in Gatwick as well as offices in Liverpool, Ipswich and Crawley.

Its chief executive, Ray Miles, said yesterday that the board had been reviewing the company's options following a difficult year in 2004. The deal offered by TUI "represents immediate and attractive value for our shareholders," he said.

CP Ships is understood to have held talks with other companies. The French group CMA CGM and China Shipping Group are among those whose names have been linked with CP Ships.

TUI intends to finance the deal, which has the unanimous backing of the CP Ships board, through a £560m rights issue and bank finance.

The German company estimates that Hapag-Lloyd would see annual synergy benefits of about £120m by the third year after completion while the costs of integrating the two operations are said to be about £70m - most of which will arise next year.

If the deal gets the backing of CP Ships shareholders, most of whom are based in North America, it is expected to be completed by October. After reports that TUI was in talks with CP Ships TUI's share price fell more than 5% on Friday amid concern among analysts and investors about a possible cash call to fund the purchase as well as its commercial rationale

Yesterday TUI chief executive Dr Michael Franzel said: "Our enlarged shipping business will be well positioned to take advantage of the strong long-term growth dynamics in the container shipping industry. This is both a compelling financial and strategic opportunity for us."

Though CP Ships, which was spun out of the old Canadian Pacific company in 2001, has its headquarters in the UK, it is listed on the Toronto and New York stock exchanges and ranks as one of Canada's top 60 listed companies.

A CP Ships spokeswoman said the company's headquarters were in Britain for "largely historic reasons," dating back to the days when it had a large passenger operation.

Asked about the outlook for the UK workforce the CP Ships spokeswoman added: "Right now it is business as usual. The driver for this transaction is not to get rid of lots of people."